In April 2019, a federal judge ruled that all employers required to file the annual EEO-1 report must include 2018 compensation data by September 30, 2019. The court ruling left some open questions for employers regarding the EEO-1 compensation data requirements. The U.S. Equal Employment Opportunity Commission (EEOC) has answered some of those questions, as we’ll explain here.
What Is the EEO-1?
U.S. employers with at least 100 employees and some smaller companies with federal government contracts must file the EEO-1 each year. The annual reports identify numbers of employees by job categories and demographic characteristics.
The EEO-1 job categories are:
- Executive/Senior Level Officials and Managers
- First/Mid-Level Officials and Managers
- Sales Workers
- Administrative Support Workers
- Craft Workers
- Laborers and Helpers
- Service Workers
Within these job categories, employers must provide the number of employees based on sex and race/ethnicity from among these options:
- Hispanic or Latino
- Black or African American
- Native Hawaiian or Pacific Islander
- Native American or Alaska Native
- Two or more races
EEO-1 Compensation Data Requirement
In February 2016, the EEOC modified the Form EEO-1 to include wage and hours data beginning March 31, 2018. In 2017, however, the Office of Management and Budget (OMB) informed the EEOC that it was suspending the new pay data collection requirements pending further review. This prompted litigation.
The plaintiffs in a lawsuit against the government prevailed. The judge is requiring the EEOC to collect the new EEO-1 compensation data from covered employers for at least two years. One of these years is 2018. The judge allowed the EEOC to decide whether the second year would be 2017 or 2019. The EEOC has selected 2017 as the second year.
For now, it’s not clear whether the EEO-1 compensation data requirement will continue beyond this year. It is possible that the EEOC will formally revise the forms going forward.
What Do Employers Need to Know?
1. What Is the Deadline for the 2018 EEO-1?
The filing period for the traditional EEO-1 survey (without the compensation data) ends May 31, 2019. Covered employers must submit the standard job category and demographic surveys by that date.
However, companies will have to submit separate new reports with the EEO-1 compensation data.
2. When Can We File the EEO-1 Compensation Data?
The EEOC expects to open filing for the new EEO-1 compensation data in mid-July 2019. When available, filers apparently will need to submit wage and hour information for both 2018 and 2017.
3. What Compensation Statistics Will We Need?
Employers will need to submit W-2 wage data and hours worked for employees within 12 specified pay bands:
Employers will report wages earned based on W-2 “Box 1” year-end earnings and hours worked.
Hours worked will be actual hours for non-exempt employees. For exempt employees, employers can report an estimate if they do not maintain actual time records. The estimate will be computed at 40 hours per week for full-time exempt employees and 20 hours per week for part-timers. Employers will report aggregate hours for all employees in each pay band and job category by ethnicity.
One concern many employers have is how much hassle it will be to satisfy this new filing requirement. That answer depends on factors like the size of the workforce and sophistication of the payroll system. Some companies will be able to generate the data quickly from computers. Others will have to analyze individual employee records to compile the necessary EEO-1 compensation data.
Another question is how the EEOC will use this new information. For various reasons, the limited aggregated payroll data might not give an accurate snapshot. Yet, the EEOC may use the numbers to evaluate potential discrepancies along gender, racial, or ethnic lines. Although the EEOC probably will not make every employer’s EEO-1 compensation data public, the reports could come out in litigation. This may include use by private plaintiffs whose attorneys could obtain the data from the EEOC by subpoena, for example.
Don’t Wait for July!
Employers who will have to file the new EEO compensation data should not wait until July to prepare. Companies should at least evaluate their ability to generate the information necessary when the filing period opens. Plus, employers should start analyzing whether the data is going to paint a picture that might cast their compensation practices in a bad light. If so, they might want to review and modify their practices or start preparing the explanation for why the EEO-1 report is misleading, as many will be given many statistical limitations in the way employers must report on wages.
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